Re: what steps we need to follow to reduce CPA?

Apart from internal tweaks to the system, you can reduce cost per acquisition substantially by changing your adwords ads.

I'm not saying that your ads are wrong - it's just that only your audience knows what they like. And that means all of them, not one person nor a group. It's thousands. Plus they're all acting independently so it's a real democracy! My point is that if you try several ads that are totally different - one that you like, one that matches it in some ways and one ad that you don't like.

And see which comes out top.

My fave ad came second, the one I thought would do least well came out top! In further tests, my own favourite has dropped from the ranks altogether and has been replaced by a better performing one.

The point is twofold. One is that there are a certain number of viewers in your audience. Increasing your CTR means getting a bigger slice of an existing market, nor do you have to do much to get it. The second point is that Google prices your clicks on a commodity basis. They charge you less for bulk purchases!

Your position in the ad ranking is determined in part by your willingness to pay for it. Most people in the #1 spot do this with brute force and ignorance. That is to say, hard cash. Having a provocative ad means you gets eyeballs, and eyeballs means clicks, and clicks means a CTR that's higher than most. Let's say you're getting 5x the clicks of the advertiser just one spot below you. You're in position #4 and he's at #5, and he's paying $20 for a click.

But wait. There's a catch.

Google wants you to pay $20.01 to be above him. Fine. But Google then says "you pay us $20.01 for ALL YOUR CLICKS" - which means you're only paying $4 a click. Give or take the odd penny.

Get a better performing ad that increases your CTR so that you're getting 6x the traffic and you've jumped to position #3 - plus of course, you're now getting more traffic because you're higher up the ladder. That means you get 7x the clicks not 6x ... so you're paying less to be in position #3 than you did to be at position #4

Are you getting the picture?

More to the point, you're in a tough market (where it's $20 a click to be in position #5) - and you've snaffled a substantial slice of that market with clicks that are costing you only a few bucks. That means high quality traffic at affordable prices which means your profit margins have widened as well. That means your CPA is well down, your traffic's up - and you're thinking "wow" and feeling just a little dizzy from it all.